The Federal Role in Shaping Canadian Cities

February 4, 2015

With an election coming this fall, the federal role in cities, and the need for and content of a national urban strategy will undoubetdly be the subject of much debate – at least among urbanists. To date, the focus has tended to be on infrastructure funding. But the debate should be much broader. Infrastructure funding is an important issue, but by no means the only one when it comes to the federal role in shaping cities.

Perhaps it’s a good time to review the significant impact that a range of federal policies already has on cities. Unfortunately, federal policy is not deliberate with respect to its urban impacts, and it’s unlikely that the impact on cities is even considered.

Here are just some of the major ways federal policy shapes cities, and sets up the issues that cities are grappling with:

Immigration policy Immigration accounts for most of the population growth in Canada’s major cities. Of the 1.16 million immigrants that came to Canada between 2006 and 2011, almost 1 million settled in just 7 major urban areas[i]. The Toronto region alone received about 425,000 international migrants in this period. This level of population growth puts significant pressure on cities and provinces to provide necessary infrastructure, including physical infrastructure like roads, water and transit, social infrastructure such as schools, etc.

Trade policy While opening up markets for Canadian producers, trade liberalization, via agreements such as NAFTA, has also brought about a significant economic restructuring. Of course what this really means is the restructuring of local, urban economies. This is an uneven process. With a concentration of conventional manufacturing, Ontario communities, for example, have lost 300,000 manufacturing jobs in just 10 years[ii]. In some cities this restructuring has meant struggling urban economies, lower property tax revenes, and the loss of middle income jobs, contributing to income polarization.

Financial market deregulation The deregulation of financial markets has supported the expansion of the financial sector, which especially impacts Canada’s largest cities. This expansion has created wealth and jobs, but has also contributed to growing income polarization, and pressure on local housing markets and affordabilty.

Interest rate policy The Bank of Canada lending rate of course has a direct impact on mortgage rates and local real estate markets. Low interest rates of recent years have helped to make construction and housing more affordable, and fuelled the remarkable demand for new construction, intensifying growth pressure and infrastructure needs in Canada’s major cities.

Foreign investment policy There are some limitations to foreign investment in Canadian business, but not regarding residential property. Global investments in real estate in both sectors can have direct impacts on local markets, for example, when deep-pocketed multinational corporations buy sites in local markets. Recent data show that absentee foreign ownership of condo units is limited and mostly a phenomenon of the downtowns of the largest cities (4-7% of units in Toronto, Montreal and Vancouver)[iii]. But in extreme cases, housing prices can become geared to global markets not local affordability. London, UK is a prime example, where local housing affordability has become an extremely contentious issue.

In other words, federal policy plays a key role in many of the most significant issues that Canadian cities are grappling with: fast growth, congestion, infrastructure shortages, affordability, income polarization.

Considered within their individual realms, there may be nothing wrong with each of these policies. But the reality is that cities are where they actually hit the ground. We need to view these and other federal policies and programs through an urban lens. This is not only because cities are where most Canadians live.

A smart federal approach to cities would build on the key understanding that it’s not that economic development just coincidentally happens to take place in cities. Rather, a smart approach would recognize that it is the particular qualities of cities and urban environments that supply competitive advantages that support innovation, productivity and wealth creation. And that urban environments offer the possiblity of doing so in an environmentally and socially sustainable way.

In a globalizing economy, the federal government plays a role as gatekeeper between global economic forces and cities. How it executes this role is extremely important; yet these policies are developed without due consideration of their impact on cities.

While transit funding is surely important, it’s not just about transit investment. We need a comperehensive urban strategy that fits the federal policy and investment pieces together, applying an urban lens, and treating them in a broader strategic context to support competitiveness and productivity, and livable, healthy communities.